Fighting the Descent Into Oligarchy with Corporate Social Responsibility

It’s something of an open secret that America isn’t quite a representative democracy. Sure, we have the trappings of a democratic government — an elected legislative branch; (partially) elected Presidents; an (ostensibly) independent judiciary — and perhaps our system did, long ago, hew a bit closer to the Platonic ideal of our founders, but we have since lost our way.

Fortunately, there has recently been an awakening to this issue in the media. In the wake of the Great Recession and the various Occupy movements — and the realization that nothing has fundamentally changed and nobody meaningful prosecuted as a result of the revelations about how government policies and financial fraudsters aided and abetted the most epic economic collapse since the 1930s — more and more attention has been paid to the relative power of the “1 percent” and the growing scourge of income inequality on our “great experiment.”

Most recently comes a study from political science professors at Princeton and Northwestern, concluding that America is, as the incomparable Hamilton Nolanput it, actually more like an oligarchy. The authors of the study, Princeton professor Martin Gilens and Northwestern professor Benjamin Page, put the conclusion in even more chilling terms: “[E]conomic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”

In other words, it is corporations and wealthy individuals — not unions, public interest organizations or regular humans — who control the levers of power in America.

Gilens and Page further found that powerful interest groups are “not substantially correlated with the preferences of average citizens” and that “[b]usiness-oriented groups” are even less representative of average Americans’ wants and needs. Their study is summed up with the following observation:

[M]ajorities of the American public actually have little influence over the policies our government adopts…. [I]f policymaking [continues to be] dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.

To some observers, there’s certainly a “No sh*t” element to all of this. Who in his or her right mind honestly believes that Main Street and Wall Street are competing on an even playing field? But that doesn’t make the conclusions any less devastating, and, taken together with other recent events, the future looks even bleaker.

Assuming that we have an interest in preventing America’s complete devolution into our very own banana republic, then corporate social responsibility efforts and campaign finance restrictions are some of the best weapons in our arsenal in the fight against that trend. Unfortunately, though Americans have used those weapons effectively in the past, recent court decisions have jeopardized the likelihood that we can continue to do so.

Take, for instance, the conflict mineral reporting requirements (section 1502) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (more commonly known as Dodd-Frank). Finalized in 2012, the conflict minerals rule was far reaching — perhaps half of all SEC issuers would be impacted — and required all SEC issuers to conduct due diligence on their supply chains in order to determine and publicly report on whether their products contain so-called “conflict minerals” used to finance atrocities in the Democratic Republic of Congo (DRC). (“Conflict minerals” are defined as cassiterite, columbite-tantalite (coltan), gold, and wolframite, as well as their derivatives — tin, tantalum and tungsten — mined in the DRC and its adjoining countries.) The first reports are due on May 31, 2014, at which point companies will have to disclose whether the minerals they use in manufacturing are “DRC conflict free.”

Not surprisingly, section 1502 was challenged in the courts by a consortium of pro-business groups led by the U.S. Chamber of Commerce and, on April 14, the U.S. Court of Appeals for the D.C. Circuit struck part of the law down. The Court found that the key provision of the rule — that companies publicly report that their products are or are not “DRC conflict free” — was a violation of business’ First Amendment rights to free speech. The SEC will likely appeal, and the court upheld the provisions of 1502 which require companies to do conflict minerals-related diligence, but for now the future of this important law is uncertain. This is a major victory for business and a loss for democracy and human rights. The less that businesses are required to say about the origins of their products, the less they are likely to care about those origins.

Corporations and the affluent scored another recent victory in the Supreme Court case, McCutcheon v. FEC. There, the Supreme Court — divided, as usual on the more political cases, on ideological lines (5-4) — “continued its abolition of limits on election spending, striking down a decades-old cap on the total amount any individual can contribute to federal candidates in a two-year election cycle.” Echoing the Court’s logic in Citizens United, Chief Justice John Roberts held that neither “leveling the playing field” nor combating “the possibility that an individual who spends large sums may garner ‘influence over or access to’ elected officials or political parties” were the type of government interest that could justify existing campaign contribution caps.

You may be saying to yourself, “but these sound like exactly the kind of government interests a real representative democracy would seek to protect!” You’re not alone.

These are frightening developments, and they should be taken seriously. Without strong CSR rules and campaign finance laws, our democracy — to the extent it even exists — is prone to be co-opted. Yet, as Hamilton Nolan wonders: “Whether or not the majority of Americans will ever tire of being systematically marginalized remains an open question.”

Michael Kourabas is a lawyer and business development professional currently working for an international law firm in New York. His experience includes international human rights, CSR, and educational policy work in both the private and public sectors.

Trained as a lawyer, I now focus on legal business development, corporate social responsibility (CSR), and business & human rights. My past experience includes work on complex commercial litigation, international human rights advocacy, education policy, pro bono legal representation, and analysis of CSR challenges in both the private and public sectors.